I qualify for foreign earned income exclusion. This shows as a negative on income on the tax form. If I convert a traditional IRA to a Roth IRA, the IRS will withhold some taxes. Since my income is negative, can I get these taxes back at the end of the year? Alternatively, can my negative income offset capital gain taxes?
Using the Turbotax program, it takes the value from form 2555, and places it as a negative number in form 1040. Reading the instructions from form 2555, it says to place the value in parenthesis which indicates a negative, correct?

2 comments so far...

Jss Said on August 19th, 2010 at 1:38 am:

How can you have negative income unless you have loss from business or capital loss?
Just making sure that you are doing Form 2555 correctly.

If you are do going to do an IRA to Roth IRA conversion, the tax for the conversion is best paid from some other source, instead of withholding from the conversion. For example if they wihhold 20% towards tax and do not add that missing 20% back in with the conversion (within 60 days), there would be a 10% penalty on that 20% withheld (because the withholding would be considered an IRA distribution).